Three directors of a company offering so-called ethical Costa Rican plantation investments have been banned after withdrawing over £7m from a tax planning scheme when they knew it was being investigated by HMRC
Matthew Pickard, Stephen Greenaway and Paul Laver, all from Dorset, have each been banned from acting as directors of a limited company for six years.
The company at the centre of the investigation, Ethical Forestry Ltd, was incorporated in December 2007 and owned 80% of a Costa Rican company, who in turn owned plantation land, a sawmill and the infrastructure to plant trees in forestry plantations.
Around 3,500 UK investors were registered with the company and invested approximately £70m in the unregulated scheme to own trees on the plantations.
Ethical Forestry used unregulated investment brokers, such as Avacade Investment Options, who offered free pension reviews before introducing the plantation investment opportunities.
Many people then invested in Ethical Forestry by transferring their occupational pensions into self-invested personal pensions (SIPPs), using providers such as Liberty SIPP.
An Insolvency Service investigation established that behind the scenes, the directors caused Ethical Forestry in 2012 to enter into a tax planning scheme. This saw £28.8m being made available to the directors through loan accounts and the company’s financial statements for 2012 to 2014 show that in excess of £19m was withdrawn by the directors.
In March 2013, however, HMRC informed Ethical Forestry that they were going to investigate the company’s new tax planning scheme and despite the warning from the tax authorities, £7.2m of the £19mn drawn down by the directors from their loan accounts was withdrawn after this date.
In July 2015, HMRC issued further notices to Ethical Forestry claiming more than £14m of liabilities for tax years 2011/12 and 2012/13.
Later that year in December 2015, Ethical Forestry entered into creditors voluntary liquidation as it could not pay its debts.
This triggered an Insolvency Service investigation into the conduct of the directors, discovering that they had caused the company to transfer £7.2m for their benefit - but this was at the risk of HMRC as there was an outstanding investigation.
Anthea Simpson, chief investigator for the Insolvency Service said: ‘This is a relatively unusual case as the conduct of the directors criticised occurred before HMRC had issued their determinations of Ethical Forestry’s liabilities.
‘However, the directors were aware that HMRC were investigating the tax planning scheme through which they had already drawn very substantial sums from the company, and yet in this knowledge they continued in the same vein for a further 12 months, taking an additional £7m.
‘We considered that this was unacceptable rather than ethical, and amounted to unfit conduct which justified disqualification.’
Simon Chaplin, assistant director - HMRC counter-avoidance, said: ‘HMRC welcomes the actions of the Insolvency Service in obtaining disqualifications in this case. Where directors cause companies to use tax avoidance schemes for personal benefit and put uncollected tax at risk they should be held accountable for their conduct.’
There is an ongoing Serious Fraud Office investigation into the tree based investment schemes run by the Ethical Group that included Ethical Forestry Ltd, which opened in December 2016.
The Financial Conduct Authority (FCA) has commenced civil proceedings against Avacade Ltd (in liquidation), trading as Avacade Investment Options. This alleges the firm made misleading statements, carried out regulated activities in the UK without FCA authorisation or exemption, and communicated financial promotions without the required authorisation or approval. The regulator is seeking restitution for investors. No court date has yet been set.